UK Signals Interest in New EU Defense Fund

James Riley

Russia-Ukraine Conflict

Remarks of Officials

Political

Summary:

UK PM Starmer considers joining an EU defense fund, signaling a deepening of post-Brexit security ties.

Prime Minister Keir Starmer has indicated that the UK will consider joining a potential new multi-billion-euro European Union fund designed to finance defense projects, signaling a possible deepening of post-Brexit security ties. The statement comes as British ministers prepare for crucial talks with EU officials in London this week.

UK Prime Minister Keir Starmer is exploring closer defense ties with the European Union, a significant move in the post-Brexit landscape.

A Push for European Rearmament

The European Commission is exploring a second version of its SAFE loans scheme as the continent grapples with the need to bolster its defense capabilities. This strategic shift is driven by growing concerns over Russia and increasing doubts about the United States' long-term security commitments to Europe under President Donald Trump.

Speaking to reporters last week en route to China, Starmer emphasized the urgency for European rearmament. "That should require us to look at schemes like SAFE and others to see whether there is a way in which we can work more closely together," he stated.

Starmer added that greater collaboration is logical for the entire continent. "Whether it's SAFE or other initiatives, it makes good sense for Europe in the widest sense of the word - which is the EU plus other European countries - to work more closely together."

A Second Chance After Initial Talks Failed

This renewed interest follows a setback in November when a British plan to join the original 150 billion-euro ($177 billion) SAFE fund collapsed. Those negotiations broke down after Starmer's government refused to make a financial contribution to participate, hindering a wider reset of UK-EU relations.

The SAFE scheme is structured for the EU to jointly borrow on financial markets and then lend the capital to member nations for defense-related projects. The potential for the UK to join a new iteration of this fund marks a significant development in its post-Brexit strategy.

Starmer’s Broader EU Engagement

The Prime Minister's move is consistent with his government's broader effort to work more closely with the EU and dismantle some of the trade barriers erected after the UK's departure from the bloc, which was finalized in 2020. This collaborative stance contrasts sharply with the often-tense relations between previous Conservative governments and Brussels.

Starmer has also taken a prominent role in coordinating European support for Ukraine, further demonstrating his commitment to continental security cooperation. The upcoming talks in London, which will include European Union Trade Commissioner Maros Sefcovic, are expected to explore these themes further.

Navigating Domestic Political Criticism

The government's closer alignment with the EU has drawn criticism from Nigel Farage, whose Reform UK party is currently leading in the polls. Farage recently accused the governing Labour party of moving too close to the European Union.

Starmer dismissed the critique, accusing the Brexit campaigner of having a history of misleading the public. "I wouldn't listen too much to what Nigel Farage has to say about this," the Prime Minister said.

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Samantha Luan

Remarks of Officials

Economic

Central Bank

Forex

Political

In a direct and unambiguous statement, Chinese President Xi Jinping has publicly declared his ambition to elevate the renminbi to the status of a global reserve currency. The message was delivered in a commentary published in Qiushi, the Communist Party's flagship journal on ideology.

Xi called for the creation of a "powerful currency" to be used widely across international trade, investment, and foreign exchange markets, ultimately achieving global reserve status. While this goal is not new for Beijing, the directness of Xi's language marks a significant shift.

The commentary was adapted from a speech Xi gave to regional officials in 2024 but was strategically released in 2026, a moment of considerable tension in global markets.

A Challenge Timed for Dollar Vulnerability

The timing of the announcement coincides with notable weakness in the U.S. dollar, which has fallen to a four-year low. Last week, 47th President Donald Trump described the dollar's slide as "great." Coupled with a leadership transition at the Federal Reserve and rising international frictions, central banks globally are beginning to reassess their exposure to the dollar.

"China senses the change of the global order more real than before," noted Kelvin Lam, a senior China+ economist at Pantheon Macroeconomics. He suggests Xi's push is directly linked to the emerging cracks in the dollar's long-standing dominance.

To support this ambition, Xi's commentary outlined the need for a "powerful central bank," globally competitive financial institutions, and the development of cities like Shanghai and Shenzhen into international financial hubs capable of attracting global capital and influencing global pricing.

This vision aligns with earlier statements from Pan Gongsheng, the governor of the People's Bank of China (PBoC). Last year, he forecasted the rise of a "multi-polar international monetary system" where the renminbi would compete alongside the dollar, euro, and other major currencies.

However, Han Shen Lin of The Asia Group clarified that China's immediate goal is not to replace the dollar but to establish the yuan as a "strategic counterweight" to limit U.S. leverage in a shifting global landscape.

Yuan's Rise in Trade Masks Reserve Weakness

The renminbi has already made significant inroads in specific areas. Since Russia's full-scale invasion of Ukraine in 2022, it has become the second-most used currency for trade finance.

But its role in official global reserves remains minimal. According to IMF data from the third quarter of 2025, the yuan's share of global reserves was just 1.93%. This figure pales in comparison to the U.S. dollar, which accounted for approximately 57% (down from 71% in 2000), and the euro at 20%.

The Hurdles: Convertibility and Global Trust

Experts point to one major obstacle preventing wider adoption by central banks: China's capital controls. For the renminbi to become a true reserve currency, Beijing would need to allow for full convertibility and open its capital accounts. The current lack of openness remains a deal-breaker for many institutional investors.

Pressure is also coming from some of China's trading partners, who argue that the yuan is deliberately undervalued. This policy, they claim, unfairly boosts Chinese exports and distorts trade balances. China's trade surplus reached $1.2 trillion last year, fueling persistent complaints of currency manipulation.

The International Monetary Fund has also weighed in. IMF Managing Director Kristalina Georgieva recently stated that deflation in China had "resulted in significant real exchange rate depreciation" and urged Beijing to address the "imbalances" in its economy.

Navigating a Path Forward

At a conference last month, PBoC vice-governor Zou Lan denied that China was intentionally weakening its currency to gain a trade advantage. He asserted that the central bank's policy objective is "to keep the renminbi stable and preserve its role as a store of value."

There are signs that China's central planners are willing to allow for modest appreciation. The yuan has already strengthened past the Rmb7 mark against the weaker U.S. dollar, though it continues to fall against the euro.

Zhang Jun, chief economist at China Galaxy Securities, suggested that as China pivots toward domestic growth and technological innovation, the yuan could strengthen further over time.

Han from The Asia Group concluded that while Xi's statement won't immediately upend foreign exchange markets, it solidifies a long-term strategic direction. "It cements a long-term tilt investors are already sniffing out," he said.

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Gerik

Political

Reframing Bilateral Engagement Through Dialogue

On January 31, the Chargé d’Affaires of the United States in Venezuela, Laura Dogu, traveled to Caracas for a direct meeting with Venezuelan Foreign Minister Yvan Gil. The discussion focused on identifying practical steps to improve relations and address long-standing disagreements between United States and Venezuela, at a time when bilateral frictions appear to be moderating. The meeting represents a shift from prolonged diplomatic distance toward a more open channel of communication.

According to Venezuela’s Ministry of Foreign Affairs, the talks form part of Caracas’s broader effort to define a clear roadmap for issues of mutual interest. The emphasis lies on resolving differences through diplomatic mechanisms rather than unilateral actions. Foreign Minister Yvan Gil underscored that the dialogue is grounded in mutual respect and adherence to international law, framing these principles as essential conditions for sustainable engagement. This framing reflects a correlational relationship between respect for sovereignty and the durability of diplomatic talks, rather than an automatic guarantee of policy convergence.

Signals From Washington And Diplomatic Continuity

On the social platform X, Laura Dogu stated that she and her team are ready to work in Venezuela, reinforcing the message that Washington intends to maintain an on-the-ground diplomatic presence. Her prior experience as U.S. Ambassador to Nicaragua and Honduras adds institutional continuity to the current engagement. As Chargé d’Affaires, she leads the U.S. mission during the absence of a formally appointed ambassador, a role that often carries operational significance during transitional phases in bilateral relations.

Officials from both sides confirmed that Washington has dispatched a working group to Caracas to evaluate the phased restoration of operations at the U.S. Embassy, which has remained largely inactive since 2019 following the suspension of diplomatic ties. This assessment process illustrates how diplomatic dialogue and institutional presence tend to move together in practice, showing correlation rather than immediate policy transformation. Any reopening would likely proceed incrementally, reflecting both political caution and logistical realities.

Venezuelan authorities indicate that both countries are exploring a more substantive cooperation framework encompassing political, diplomatic, and economic issues of shared concern. Caracas has reiterated that all exchanges will be conducted on the basis of dialogue and respect for national sovereignty, presenting these principles as the foundation for improving bilateral relations in the period ahead. While the current discussions do not resolve structural disagreements, they suggest a recalibration in tone and process that could shape future interactions if maintained consistently over time.

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Henry Thompson

Economic

Political

Energy

The United Kingdom is intensifying its drive to decarbonize its economy under the Labour government that took office in 2024, aiming to meet its ambitious net-zero emissions target by mid-century. But this green push is facing a significant challenge: a growing political rift over the immense costs of the transition.

The UK's commitment to achieving net-zero by 2050 was first established in 2021, aligning the nation with the goals of the international Paris Agreement on climate change. Initial strategies, however, faced legal hurdles, with courts ruling early proposals unlawful for their lack of concrete planning. This pushed the government to develop more detailed frameworks to guide the transition.

Policy Milestones and Renewable Energy Gains

The government's current roadmap is the 2025 Carbon Budget and Growth Delivery Plan. A key initiative announced in December 2024 is the goal of achieving "Clean Power by 2030," backed by the Great British Energy Act. This legislation created a publicly-owned company to accelerate investment in renewables.

Other core policies include:

• Ending the sale of new petrol and diesel cars by 2030.

• Subsidizing electric heat pumps to replace gas boilers.

• Investing in carbon capture and storage (CO2) technology.

These policies have yielded tangible results. In 2024, renewable sources generated 51% of the UK's electricity, with wind power alone accounting for a 30% share. The country also became the first G7 nation to completely phase out coal power that same year. Overall, the UK's greenhouse gas emissions in 2024 were approximately 54% lower than 1990 levels.

Despite this progress, the government’s independent adviser, the Climate Change Committee (CCC), warned in June 2025 that further action is still required.

Political Fault Lines: The Battle Over Decarbonization

While the policy framework is in place, political consensus is fracturing. Opponents argue the transition is too expensive and complex, prioritizing environmental targets over economic stability. The main political parties hold starkly different views:

• Labour and Liberal Democrats: Both parties remain committed to the mid-century goal, arguing that reducing fossil fuel dependency is crucial for economic security amid volatile energy prices and geopolitical risks.

• Conservatives and Reform UK: These parties advocate for scrapping the net-zero target altogether. They claim the strategy is unaffordable and that the UK's emissions reductions have a negligible impact on global climate change compared to larger emitters like the US and China.

• Green Party: This party believes the current pace is too slow and wants to accelerate the timeline for achieving net-zero.

The Trillion-Pound Question: What's the Real Cost?

The central point of contention is the ultimate cost of the green transition, with estimates varying wildly. The Climate Change Committee (CCC) projects a net cost of around 0.2% of the UK's GDP annually between 2025 and 2050. This implies tens of billions in upfront investment each year until the end of the decade, with a total cumulative cost estimated at £108 billion.

However, a recent report from the Institute of Economic Affairs think tank, citing energy analyst David Turner, presents a far higher figure, suggesting the total cash cost could reach an astonishing £7.6 trillion by 2050.

The CCC maintains that most of this investment will come from the private sector. Furthermore, it projects that the savings from moving to cleaner, more efficient energy will outweigh the costs by the early 2040s, while also reducing spending on climate hazard mitigation. Supporting this view, the National Energy System Operator (NESO) for Great Britain stated that embracing clean energy fundamentally reduces exposure to volatile fossil fuel markets. According to a NESO report, meeting the 2050 goals could save the UK £36 billion annually compared to a scenario where the transition slows down.

Ambitious Targets at a Crossroads

The UK has successfully established robust policies that are accelerating its shift from fossil fuels to renewable energy and driving down emissions. However, the immense financial commitments required for this transition have created deep divisions within parliament. As parties clash over the economic trade-offs, the country's ability to meet its long-term climate targets hangs in the balance.

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Gerik

Political

Diplomatic Outreach Intensifies Amid Rising Regional Risks

As uncertainty deepens across the Gulf region, Iran has stepped up diplomatic engagement with key regional players while cautiously opening the door to direct dialogue with Washington. On January 31, Iranian President Masoud Pezeshkian held a phone call with Egyptian President Abdel-Fattah al-Sisi, emphasizing that Tehran does not seek war and views armed conflict as harmful to all parties, including the United States and the wider Middle East. Pezeshkian stressed that Iran’s preferred path is one grounded in mutual respect, equality, and dialogue free from threats.

From Cairo’s perspective, al-Sisi voiced support for any initiative that could ease tensions, warning that a military confrontation would carry severe consequences for the entire region. This exchange underscores Egypt’s concern that escalating hostilities could destabilize already fragile regional dynamics.

Qatar’s Mediation and Signals Toward Washington

On the same day, Qatar’s prime minister and foreign minister travelled to Tehran to meet Ali Larijani, secretary of Iran’s Supreme National Security Council. Qatar has continued to position itself as a diplomatic intermediary, encouraging de-escalation and dialogue among rival powers in the Gulf.

Larijani revealed that Iran is preparing, step by step, for potential negotiations with Washington. This statement aligns with remarks from US President Donald Trump, who recently confirmed that contacts with Tehran are underway and suggested the possibility of reaching a bilateral agreement. The convergence of messaging from both sides points to a tentative opening, although concrete details remain scarce.

Regional Anxiety Over US Military Posture

Despite these diplomatic signals, uncertainty surrounding US intentions has unsettled Gulf Cooperation Council states. Washington has reportedly declined to share military plans with regional allies, citing security concerns. This lack of transparency has heightened anxiety, particularly as Saudi Arabia issued a firm statement rejecting any use of its airspace or military bases by the US for an attack on Iran.

At the same time, Trump warned that the United States is deploying what he described as its largest and most powerful naval fleet ever toward waters near Iran. Tehran has responded by cautioning that any military action by the US or Israel would trigger serious consequences, threatening the security of both countries and the broader Middle East.

Military Signaling Versus Diplomatic Intent

Iran has reinforced its deterrence posture through live-fire military exercises in the Strait of Hormuz, a critical artery for global energy flows. These drills serve as a reminder of Tehran’s capacity to disrupt vital shipping lanes, raising the stakes for any potential confrontation.

The coexistence of diplomatic outreach and military signaling highlights a complex strategic balance. Iran’s openness to talks appears driven by a desire to reduce the probability of armed conflict, rather than a fundamental shift in strategic alignment. Whether this cautious diplomatic opening evolves into substantive negotiations will depend on mutual trust, clarity of intentions, and the willingness of all parties to prioritize de-escalation over coercion.

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James Riley

Russia-Ukraine Conflict

Daily News

Remarks of Officials

Political

Ukrainian President Volodymyr Zelenskyy announced Sunday that the second round of U.S.-backed peace talks between Ukraine and Russia will be held in Abu Dhabi on February 4 and 5.

Zelenskyy stated that his country is prepared for a "substantive discussion," adding on the social media platform X, "We are interested in ensuring that the outcome brings us closer to a real and dignified end to the war."

The talks were originally scheduled to begin on Sunday but were postponed. Neither the Kremlin nor the United States has officially confirmed the new dates.

Ukrainian President Volodymyr Zelenskyy announced the rescheduled peace talks, emphasizing his country's readiness for substantive discussions.

Diplomatic Prelude in Florida

The delay followed a meeting in Florida between Russia's top envoy, Kirill Dmitriev, and a U.S. delegation. Zelenskyy did not specify a reason for the postponement.

Dmitriev described his discussion with the "U.S. peacemaking delegation" as constructive. The American officials included President Donald Trump's peace envoy Steve Witkoff, Treasury Secretary Scott Bessent, Trump's son-in-law Jared Kushner, and White House Senior Advisor Josh Gruenbaum.

"We are encouraged by this meeting that Russia is working toward securing peace in Ukraine," Witkoff said. No further details about the discussion were released by either side.

The Unresolved Donbas Question

The Abu Dhabi negotiations are a key part of the Trump administration's efforts to resolve the conflict, which has now lasted nearly four years.

The first round of talks took place in late January but failed to produce a breakthrough on the central issue of territory, specifically the eastern Ukrainian region known as the Donbas.

Russia continues to demand that Ukrainian forces withdraw from the region. In response, Kyiv has warned that ceding any territory would only embolden Moscow.

Violence Erupts Despite Ceasefire

The talks were set against a backdrop of fragile diplomacy. Russia had reportedly agreed to a request from President Trump to pause strikes on Ukraine's energy infrastructure to facilitate the negotiations, especially as Ukraine endures a harsh winter.

Kremlin spokesman Dmitry Peskov confirmed on Friday that the limited ceasefire would last only until Sunday to create a "good basis" for the talks.

However, violence continued on the ground. On Sunday, a Russian drone strike hit a company shuttle bus transporting mine workers in the Dnipropetrovsk region in central-eastern Ukraine. Energy firm DTEK and government officials confirmed that the attack killed 15 people and wounded seven.

The aftermath of a Russian drone attack on a bus carrying mine workers in the Dnipropetrovsk region on Sunday.

Earlier the same day, regional officials reported separate Russian attacks on a maternity hospital and a residential building in the southeastern city of Zaporizhzhia, which left at least nine people injured.

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Economic

A Surge in High-Level Engagement Under Pressure From Washington

Air routes between Europe and China have become unusually busy since late 2025, as a succession of European leaders travelled to Beijing. This wave of visits began with trips by the King of Spain and the French president, followed by leaders from the United Kingdom, Ireland, and Finland, with the German chancellor expected to visit by late February 2026. These moves coincided with renewed friction between Europe and the United States under Donald Trump, ranging from trade disputes to controversial remarks on Greenland that revived doubts about Washington’s long-term commitment to NATO.

Against this backdrop, closer engagement with China has been interpreted by some observers as Europe seeking alternative strategic options. However, most analysts argue that these contacts do not amount to a coherent pivot, but rather a series of precautionary moves driven by uncertainty over US behavior.

China as Leverage, Not a Value-Based Partner

According to Luis Garicano of the London School of Economics, China does not share Europe’s core political and institutional values in the way the United States does. Nevertheless, in a more confrontational global environment, Europe requires bargaining leverage. Expanding diplomatic and economic channels with Beijing offers optionality rather than alignment.

This logic is defensive rather than transformative. Engagement with China is being used to diversify Europe’s external relationships, not to replace the transatlantic partnership. The relationship therefore remains transactional, shaped by immediate economic and geopolitical calculations rather than long-term convergence.

Fragmented European Approaches Reflect Structural Ambivalence

Europe’s stance toward China remains highly fragmented. Some EU member states view stronger economic ties with Beijing as a contingency plan against US trade pressure. Others remain deeply wary, particularly due to China’s close relationship with Russia as the war in Ukraine approaches its fourth year.

The European Union has shown openness to Chinese investment in sectors such as electric vehicles and batteries, recognizing the capital and industrial capacity China can provide. At the same time, this openness is tempered by concern over low-cost Chinese exports undermining European industry. Ron Stoop of The Hague Centre for Strategic Studies notes that EU–China relations have shifted from complementarity to direct competition, making a true strategic pivot unlikely.

Pragmatic Transactionalism Takes Shape in Brussels

In Brussels, a pragmatic and transactional approach is emerging. The EU is willing to cooperate with China where interests align, while simultaneously tightening restrictions on Chinese firms in sensitive technology sectors and promoting “buy European” procurement rules to protect strategic markets.

Skepticism remains high regarding China’s willingness to make concessions on core EU concerns. Disputes over rare earth export controls and the high-profile case involving the Dutch semiconductor firm Nexperia have added strain. Joanna Szychowska of the European Commission has noted that Beijing currently prioritizes narrow transactional gains and shows limited interest in addressing Europe’s structural grievances.

Economic Gravity Versus Strategic Limits

Despite political tensions, China’s economic weight remains highly attractive during a period of global uncertainty. While the EU is accelerating trade talks with India, Mercosur, Australia, and Indonesia, China remains too large to ignore. Ireland recently secured access for its beef exports to the Chinese market, while Chinese EV maker Chery announced its European headquarters in Liverpool during UK Prime Minister Keir Starmer’s visit to Beijing.

Spain has moved most decisively, with Prime Minister Pedro Sánchez attracting billions of dollars in Chinese investment as part of a strategy to position Spain as a European automotive hub. This approach also allows Sánchez to distinguish himself from Trump-style politics on issues ranging from immigration to NATO defense spending.

In Eastern Europe, even traditionally hawkish countries such as Latvia are reassessing their China policies ahead of elections, though analysts caution that reduced US engagement does not imply China will fill the strategic vacuum.

A Relationship Defined by Asymmetry

The prospects for a genuine European pivot toward China ultimately depend on Beijing’s readiness to compromise. The EU–China summit in July 2025 produced limited results, reinforcing the perception that China currently prefers confrontation over accommodation. Speaking in Davos, Belgian Prime Minister Bart de Wever acknowledged the necessity of dialogue with China but stressed that only a united Europe can clearly define and defend its interests.

For now, the balance of leverage appears tilted toward Beijing. Europe’s outreach to China is best understood as tactical hedging in an increasingly unstable global order, not as a fundamental realignment of its strategic orientation.

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